CPI fell to 5.7% in December, a tenth less than expected by the INE, but core inflation skyrocketed to 7%
The moderation in inflation in the last five months of 2022 does not seem to be making its way into the shopping basket. The National Institute of Statistics (INE) confirmed this Friday that the CPI for December was 5.7%, lower than the expected 5.8% and a rate also lower than that recorded in the same month of 2021 (6.5% ).
In other words, the year ended much better than it started and a long way from the peak of 10.8% reached in July. However, food prices ended the year with a completely out of control growth. Specifically, the variation increased by four-tenths to 15.7%, the highest since the series began in January 1994.
These are explosive figures for consumers’ pockets, with the highest price increases in basic products such as milk, cheese and eggs, oils and fats, mineral water, soft drinks, fruit and vegetable juices and meat, all greater than in December 2021.
The increase in the price of the shopping basket forced the government to abolish VAT on products that already had a reduced rate of 4% from 1 January 2023, reducing it from 10% to 5%. . But the effect of this measure on inflation will only become visible when the CPI for January is known. In addition, the government wants the tax cut to be scrapped if underlying inflation – which does not account for energy products or unprocessed food – remains above 5.5%.
At the moment it is foreseeable that it will take several months before this happens. According to the INE’s final data, the core rate – which excludes energy products or unprocessed foods – rose seven-tenths to 7% in December, from 6.3% the previous month. They are the highest since November 1992. And worse data than expected a few weeks ago, which suggested the indicator should be at 6.9%.
You have to go back to February 2021 to see the underlying above the general index, even though levels back then were much lower than they are now.
This reference would therefore have to fall by 1.5 percentage points before the government decides to end the VAT reductions for certain foodstuffs that currently do not affect fish or meat, two of the products that have become more expensive in the last few months.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
